EB Daily Market Report - Wednesday, March 30, 2022

Tom Bowley - March 30, 2022

Today's Event

At 4:30pm ET today, I will be hosting our "Resumption of Secular Bull Market" event, where I'll be discussing a few favorite areas where emerging leaders will likely lead the next phase of this multi-decade secular bull market. Here's the link that you can use to join the webinar room (after 4:00pm ET):

https://earningsbeats.zoom.us/j/87460898953

We will record the event, as always, if you're unable to attend live.

Executive Market Summary

Futures were lower overnight and we opened today on a negative note
Growth (IWF, -0.65%) and value (IWD, -0.25%) stocks alike are seeing a bit of downside action
Energy (XLE, +1.01%) has regained its leadership role today as crude oil ($WTIC, +3.60%) has spiked
The ADP employment report came in about as expected and offered no big surprises; Wall Street still awaits Friday's nonfarm payrolls report, which is the bigger and more-closely-watched report of the two
Gold ($GOLD, +1.10%) is bouncing after a significant drop the past two sessions
The 10-year treasury yield ($TNX) is down 5 basis points to 2.35%, leading to relative weakness in financials (XLF, -0.71%)
Consumer discretionary (XLY, -0.93%), a leader during this market rebound, is underperforming thus far today
Furnishings ($DJUSFH, -3.49%) and home improvement retailers ($DJUSHI, -3.03%) are the weakest areas within discretionary
Lululemon (LULU, +11.02%) is soaring today after a strong quarterly earnings report; its strength is lifting the clothing & accessories ($DJUSCF, +2.80%) group

Market Outlook

The S&P 500 has printed higher daily highs and higher daily lows 11 of the last 12 trading sessions, including today thus far. It's hard to argue that the bears have any control whatsoever when prices keep rising day after day. In the very near-term, here's a 10-day, 10-minute chart that illustrates the two critical short-term support levels to watch:

The bears have little chance until support in the 4575-4590 is lost. If that goes, then the odds increase that our short-term top is in and we could see further selling.

Sector/Industry Focus

I featured consumer staples (XLP) recently, highlighting the short-term downtrend and intermediate-term uptrend. Well, the downtrend line has been broken and the XLP certainly appears to be regaining its prior and longer-term strength:

I mention this, because it adds to the potential upside for the trading candidate below, as it belongs to the consumer staples sector. When I see a sector reflecting a bullish breakout like the XLP and I have a recent leader within the sector pulling back to a key area of support, I like the odds of a successful trade ahead.

ChartLists/Strategies

One of our portfolio stocks, McCormick & Co (MKC), reported quarterly results yesterday and they beat consensus estimates on both the top line (revenues) and bottom line (EPS). Yet the stock has fallen from yesterday's open of 99.14 to the most recent price of 95.03. This represents roughly a 4% decline and could be providing a solid entry point. Here's the chart:

I love the AD line here. A strong AD line is formed when a stock has a tendency to close at the higher end of its current day's trading range. Therefore, morning weakness can provide a solid opportunity for entry, anticipating the afternoon strength.

Earnings Reports

Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.

Wednesday, March 30:

PAYX, BNTX, PATH, FIVE, AER, MSM, BRZE, PHR

Thursday, March 31:

WBA, BB, DCT

Economic Reports

March ADP employment report: 455,000 (actual) vs. + 438,000 (estimate)

Q4 GDP (Final Estimate): 6.9% (actual) vs. 7.1% (estimate)

Happy trading!

Tom